CSR Impact Evaluation – BMS Notes

As the third year of the Corporate Social Responsibility (CSR) Rules enters into effect, firms’ perspectives on social issues are evolving.

The majority of businesses concentrated more on compliance than the results of their efforts during the first and second year after the regulations went into force. These days, the main concerns are growth and course correction.

In order to guarantee enduring effects and economical use of resources, several businesses are carrying out impact assessment studies of their CSR initiatives.

Companies having a net worth of ₹ 500 crore, sales of ₹ 1,000 crore, or net profit of ₹ 5 crore are obliged by the CSR Rules 2014 to dedicate two percent of their average profit from the previous three years to social development initiatives including healthcare, sanitation, and education.

As stated by Ramraj Pai, head of the charitable division of financial analytics company Crisil Ltd., “Firms are learning that resolving social issues takes the same rigour and discipline as commercial operations.”

The ratings company just began to engage in large-scale CSR initiatives after the 2014 regulations. In FY15, it committed over ₹ 4 crore, or 1.42 percent of its net profit, to environmental preservation and enhancing the financial capacity of rural women.

Pai thinks the Crisil Foundation’s request for a third party to do a baseline assessment enabled them to take a comprehensive approach to financial inclusion. “Impact assessment is crucial and should not just be a survey at the end of an activity; it should be a continuous process. He clarified that the only way to determine the effect of an endeavour is to compare its before and after using certain indicators.

It’s important to keep in mind that impact assessment cannot serve as a goal in itself. It must be included into the project’s design from the outset, including baseline, mid-term, and final assessments. Referencing the Crisil Foundation’s efforts to promote financial inclusion in Assam, Pai stated that although the project’s goal was to increase financial literacy, the baseline survey made it clear to the business that, in order to have a significant impact, trust-building would also need to be prioritised.

“We discovered that in order to convince and reassure the ladies to engage with us, we needed to establish a connection with the community elders even before we could begin working with them to educate them how to create an account, use an ATM, etc.,” Pai said.

The company carried out the baseline survey in 2014, and in early 2017, it plans to carry out a mid-term evaluation.

Issues related to social development differ greatly by area and community. This supports impact evaluation as well since no two geographies or communities are the same and cannot be served by a one-size-fits-all strategy due to their unique demands, constraints, etc.

As per Adarsh Kataruka, director of CSR consultancy firm SoulAce Ltd., which serves over 60 CSR clients in over 250 locations, “impact assessment helps in course correction and gives direction to a company to scale up/replicate its successful initiatives and at the same time, remodel or shut down the initiatives which have not been able to create impact.”

Six impact assessment studies were initiated by the fast-moving consumer goods giant ITC Ltd in 2015-16 as part of its CSR activities, which are now being carried out in 17 states.

Long before the CSR Rules went into effect, the corporation was actively engaged in community-based projects in such like social forestry and sustainable agriculture.

According to Sivakumar, group head of ITC’s information technology and agricultural operations, these evaluations have assisted the corporation in assessing and improving its ongoing initiatives. Additionally, the studies provide suggestions and point out areas for development, allowing us to proceed with the project in the right way. In order to support and legitimise a position for advocacy, the research are also used,” he said.

Since 2008, the Piramal Group has carried out CSR projects via the Piramal Foundation, its charitable arm. Additionally, the foundation does impact analyses on a regular basis.

The CEO of the Piramal Foundation, Paresh Parasnis, gave the example of the organization’s work in education, wherein 1,200 government schools in Rajasthan, Gujarat, and Maharashtra participate in assessments at the start and end of the academic year to determine how much the students have actually learned. In FY15–16, the company invested ₹ 56.65 crore in CSR projects across industries like drinking water, healthcare, and education.

“We have realised that we will end up just spending money without producing positive results or improving people’s lives unless we start with assessing needs of the community, designing projects that address these needs, and then measuring whether those needs have been sufficiently addressed,” Parasnis stated.

He went on to say that impartial assessors are the best people to gauge social return on investment.

These evaluations, which are conducted between businesses, are not available to the public and are mostly used internally. For example, in 2016, Maruti Suzuki Ltd., an automobile manufacturer, carried out an internal survey because, in the words of Ranjit Singh, the head of CSR, such evaluation makes sense.

Companies may be reluctant to release such information into the public realm for the simple reason that they think doing so may create a bad impression, particularly if the project’s review indicates that a course correction is needed.

Sidharth Dutta, senior manager of development advisory services at EY India, stresses that this information “may help in improving the overall effectiveness of a social initiatives” and calls on businesses to plan and carry out appropriate impact assessment studies as well as disseminate the information. It lessens individual procedural stress and aids in the establishment of best practises for generating greater project success, which advances knowledge growth.

Organizations and the general public should also keep in mind that while many have launched CSR programmes just after the regulations went into effect, some companies may not be solely to blame for failures.

“A large number of years of the project being in operation are required for adequate impact assessment to determine what change has taken place on the ground,” according to Dutta of EY. According to him, a thorough impact assessment can only be conducted two to four years into a project’s execution.

Once again, the solution is not to perform an impact assessment just for the sake of doing so. “A lot of businesses don’t track the true results of their CSR investments. They quantify it by counting the number of women who get protein powder or children who receive school clothes, for example. Few of them have put in place systems to gauge the true, long-term effects on the community, according to Sunil Chavan, honorary director of the Dr. M.L. Dhawle Trust, a charitable organisation that addresses problems with sustainable agriculture, livelihood, and health.

He says that rather than counting the number of persons affected, the impact evaluation should concentrate on how the socioeconomic status of the recipients (or any particular aspect for whom the project was intended) has changed.

Giving as an example the many companies that have started CSR initiatives related to sanitation after Prime Minister Narendra Modi called for a Clean India by the year 2019 Dutta pointed out that evaluations at the moment often only consider outcomes, such as the quantity of restrooms constructed. But in order to truly comprehend the impact on the ground, he added, businesses must shift from using external factors like merely counting the number of restrooms to analysing qualitative aspects of beneficiaries’ lives, such as actual usage rates and the degree to which sociocultural variables of community life have improved, as well as assessing the state of health indicators.